Equity Residential Reports Strong Results

Tue Jul 30, 2013 4:21pm EDT

* Reuters is not responsible for the content in this press release.

Equity Residential Reports Strong Results

Same Store Revenues Increase 4.9% in 2Q and 5.0% YTD

Same Store NOI Increases 5.6% in 2Q and 5.8% YTD

Equity Residential (NYSE: EQR) today reported results for the quarter and six months ended June 30, 2013. All per share results are reported as available to common shares on a diluted basis.

“We are pleased that apartment fundamentals across our markets remain strong and that we will again produce results for the full year in line with our original guidance and well above historical trends,” said David J. Neithercut, Equity Residential’s President and CEO. “We are extremely proud of our property teams across the country for delivering such strong performance while simultaneously integrating 21,000 newly acquired apartment units into our portfolio.”

Second Quarter 2013

FFO (Funds from Operations), as defined by the National Association of Real Estate Investment Trusts (NAREIT), for the second quarter of 2013 was $0.73 per share compared to $0.64 per share in the second quarter of 2012.

For the second quarter of 2013, the company reported Normalized FFO of $0.71 per share compared to $0.68 per share in the same period of 2012. The difference is due primarily to:

  • the positive impact of approximately $0.04 per share from higher same store net operating income (NOI);
  • the positive impact of approximately $0.27 per share from the stabilized Archstone properties, offset by the negative impact of approximately $0.25 per share from 2012 and 2013 disposition activity and common share issuance in connection with the company’s purchase of Archstone; and
  • the negative impact of approximately $0.03 per share from higher interest expense and other items.

Normalized FFO begins with FFO and eliminates certain items that by their nature are not comparable from period to period or that tend to obscure the company’s actual operating performance. Merger expenses and prepayment penalties are not included in the company’s Normalized FFO. A reconciliation and definition of Normalized FFO are provided on pages 26 and 29 of this release and the company has included guidance for Normalized FFO on page 27 of this release.

For the second quarter of 2013, the company reported earnings of $0.90 per share compared to $0.33 per share in the second quarter of 2012. The difference is due primarily to higher gains from property sales in the second quarter of 2013, partially offset by higher depreciation as a result of the Archstone acquisition, as well as the items discussed above.

Six Months Ended June 30, 2013

FFO for the six months ended June 30, 2013 was $0.97 per share compared to $1.24 per share in the same period of 2012. The difference is due primarily to merger-related expenses and prepayment penalties incurred in the first six months of 2013 in connection with the company’s acquisition of Archstone.

For the six months ended June 30, 2013, the company reported Normalized FFO of $1.35 per share compared to $1.29 per share in the same period of 2012.

For the six months ended June 30, 2013, the company reported earnings of $3.84 per share compared to $0.81 per share in the same period of 2012.

Same Store Results

On a same store second quarter to second quarter comparison, which includes 85,509 apartment units, revenues increased 4.9%, expenses increased 3.6% and NOI increased 5.6%.

On a same store six-month to six-month comparison, which includes 84,965 apartment units, revenues increased 5.0%, expenses increased 3.4% and NOI increased 5.8%.

Acquisitions/Dispositions

During the second quarter of 2013, the company acquired one property located in Redmond, Washington, consisting of 322 apartment units, for a purchase price of $91.5 million and a capitalization (cap) rate of 4.7%. The company also acquired one land parcel located in Seattle for future development for a purchase price of $16.5 million.

During the first six months of 2013, the company acquired 77 properties, consisting of 22,103 apartment units. With the exception of the acquisition discussed above, these properties were acquired as part of the company’s $9 billion acquisition of 60% of the assets and liabilities of Archstone.

During the quarter, the company sold 19 apartment properties, consisting of 5,745 apartment units, for an aggregate sale price of $729.9 million at a weighted average cap rate of 6.1%. These sales, excluding one Archstone asset that was sold shortly after its acquisition, generated an unlevered internal rate of return (IRR), inclusive of management costs, of 10.5%.

The company sold properties in the following markets during the quarter:

           

Market

Properties

Units

Sale Price (millions)

Phoenix 7 2,032 $241.1
Seattle 2 653 126.8
Suburban New England 3 646 73.1
Atlanta 2 627 80.3
Washington, D.C. 2 620 94.6
Jacksonville 1 480 55.1
Orlando 1 456 37.4
Tacoma 1 231 21.5
19 5,745 $729.9
 

Also during the quarter, the company sold one commercial property adjacent to our Harbor Steps property in downtown Seattle for $30.7 million and five land parcels for an aggregate sale price of $59.8 million, generating an economic gain of approximately $29.0 million.

During the first six months of 2013, the company sold 82 apartment properties, consisting of 24,197 apartment units, for an aggregate sale price of $3.7 billion at a weighted average cap rate of 6.0%. These sales, excluding two Archstone assets that were sold shortly after their acquisition, generated an unlevered IRR, inclusive of management costs, of 9.7%.

Please see page nine of this release for comparative portfolio summaries for the end of the fourth quarter 2012 and the end of the second quarter 2013.

Capital Markets Activities

The company also announced today certain actions designed to maintain its flexibility in the capital markets.

Earlier today, the company filed with the SEC a new universal shelf registration statement on Form S-3 for use in future registered equity and debt securities offerings. This registration statement was filed to replace the company's current universal shelf registration statement, which expires later this year.

The company’s Board has also authorized an increase to the amount of shares which may be offered under the company’s At-The-Market (ATM) offering program from 6 million shares to 13 million shares. The company has also modified its existing share repurchase program to allow for the potential repurchase of up to 13 million company common shares. The program previously had repurchase capacity equating to approximately 8 million shares. These actions replenish the capacity in these programs to levels that the company believes are appropriate for its size. The company has not used its ATM program since the third quarter of 2012, has not used its share repurchase program for open market repurchases since 2008 and has no immediate plans to utilize either program.

Also, as previously disclosed, on April 10, 2013, the company closed a $500 million unsecured note offering maturing April 15, 2023 with a coupon of 3.0% and an all in effective rate of approximately 4.0% including the effect of fees and the termination of certain interest rate hedges. Proceeds from the issuance were used to repay secured debt and amounts outstanding on the company's revolving credit facility, fund termination costs on interest rate swaps and for other corporate purposes.

Third Quarter 2013 Guidance

The company has established a Normalized FFO guidance range of $0.71 to $0.75 per share for the third quarter of 2013. The difference between the company’s second quarter 2013 Normalized FFO of $0.71 per share and the midpoint of the third quarter guidance range of $0.73 per share is due primarily to a positive impact of approximately $0.02 per share from lower interest expense and general and administrative costs.

Full Year 2013 Guidance

The company has revised its guidance for its full year 2013 same store operating performance, transactions and Normalized FFO results as well as other items listed on page 27 of this release. The changes to the full year same store, transactions and Normalized FFO guidance are listed below:

   

Previous

Revised

Same store:
Physical occupancy 95.3% 95.3%
Revenue change 4.0% to 5.0% 4.4% to 4.6%
Expense change 2.5% to 3.5% 3.0% to 3.5%
NOI change 4.5% to 6.0% 5.0% to 5.25%
 
Acquisitions: $100 million $100 million
Dispositions: $4.0 billion $4.1 billion
Cap Rate Spread: 100 basis points 110 basis points
 
Normalized FFO per share: $2.80 to $2.90 $2.80 to $2.85
 

The difference between the midpoint of the previous Normalized FFO guidance range and the midpoint of the revised guidance range is due primarily to the company completing its approximately $4 billion disposition program earlier in the year than originally expected.

Third Quarter 2013 Earnings and Conference Call

Equity Residential expects to announce third quarter 2013 results on Wednesday, October 30, 2013 and host a conference call to discuss those results at 10:00 a.m. CT on Thursday, October 31, 2013.

Equity Residential is an S&P 500 company focused on the acquisition, development and management of high quality apartment properties in top U.S. growth markets. Equity Residential owns or has investments in 398 properties located in 12 states and the District of Columbia, consisting of 113,388 apartment units. For more information on Equity Residential, please visit our website at www.equityapartments.com.

Forward-Looking Statements

In addition to historical information, this press release contains forward-looking statements and information within the meaning of the federal securities laws. These statements are based on current expectations, estimates, projections and assumptions made by management. While Equity Residential’s management believes the assumptions underlying its forward-looking statements are reasonable, such information is inherently subject to uncertainties and may involve certain risks, including, without limitation, changes in general market conditions, including the rate of job growth and cost of labor and construction material, the level of new multifamily construction and development, competition and local government regulation. Other risks and uncertainties are described under the heading “Risk Factors” in our Annual Report on Form 10-K and subsequent periodic reports filed with the Securities and Exchange Commission (SEC) and available on our website, www.equityapartments.com. Many of these uncertainties and risks are difficult to predict and beyond management’s control. Forward-looking statements are not guarantees of future performance, results or events. Equity Residential assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

A live web cast of the company’s conference call discussing these results will take place tomorrow, Wednesday, July 31, at 9:00 a.m. Central. Please visit the Investor section of the company’s web site at www.equityapartments.com for the link. A replay of the web cast will be available for two weeks at this site.

       
Equity Residential
Consolidated Statements of Operations
(Amounts in thousands except per share data)
(Unaudited)
 
Six Months Ended June 30, Quarter Ended June 30,
2013 2012 2013 2012
REVENUES
Rental income $ 1,151,918 $ 874,338 $ 632,405 $ 446,139
Fee and asset management   4,833     4,276     2,673     2,212  
Total revenues   1,156,751     878,614     635,078     448,351  
 
EXPENSES
Property and maintenance 220,417 173,819 117,819 85,423
Real estate taxes and insurance 145,400 104,268 78,547 53,422
Property management 44,520 44,276 22,031 20,937
Fee and asset management 3,223 2,487 1,577 1,180
Depreciation 528,328 289,273 327,985 145,438
General and administrative   32,582     27,079     16,086     13,391  
Total expenses   974,470     641,202     564,045     319,791  
 
Operating income 182,281 237,412 71,033 128,560
 
Interest and other income 504 427 249 258
Other expenses (3,544 ) (14,603 ) (981 ) (8,802 )
Merger expenses (19,559 ) (1,834 ) (467 ) (685 )
Interest:
Expense incurred, net (317,417 ) (232,254 ) (122,950 ) (114,627 )
Amortization of deferred financing costs   (11,301 )   (6,945 )   (4,353 )   (4,017 )
(Loss) income before income and other taxes, (loss) from investments in
unconsolidated entities, net gain on sales of land parcels and
discontinued operations (169,036 ) (17,797 ) (57,469 ) 687
Income and other tax (expense) benefit (833 ) (380 ) (428 ) (213 )
(Loss) from investments in unconsolidated entities due to operations (1,530 ) (1,175 )
(Loss) from investments in unconsolidated entities due to merger expenses (53,010 ) (6,999 )
Net gain on sales of land parcels   14,616         14,616      
(Loss) income from continuing operations (209,793 ) (18,177 ) (51,455 ) 474
Discontinued operations, net   1,607,559     278,659     388,187     107,841  
Net income 1,397,766 260,482 336,732 108,315
Net (income) loss attributable to Noncontrolling Interests:
Operating Partnership (56,111 ) (11,150 ) (12,788 ) (4,732 )
Partially Owned Properties   790     (769 )   815     (319 )
Net income attributable to controlling interests 1,342,445 248,563 324,759 103,264
Preferred distributions   (2,072 )   (6,933 )   (1,036 )   (3,467 )
Net income available to Common Shares $ 1,340,373   $ 241,630   $ 323,723   $ 99,797  
 
Earnings per share – basic:
(Loss) from continuing operations available to Common
Shares $ (0.58 ) $ (0.08 ) $ (0.14 ) $ (0.01 )
Net income available to Common Shares $ 3.84   $ 0.81   $ 0.90   $ 0.33  
Weighted average Common Shares outstanding   348,654     299,499     359,653     300,193  
 
Earnings per share – diluted:
(Loss) from continuing operations available to Common
Shares $ (0.58 ) $ (0.08 ) $ (0.14 ) $ (0.01 )
Net income available to Common Shares $ 3.84   $ 0.81   $ 0.90   $ 0.33  
Weighted average Common Shares outstanding   348,654     299,499     359,653     300,193  
 
Distributions declared per Common Share outstanding $ 0.80   $ 0.6750   $ 0.40   $ 0.3375  
       
Equity Residential
Consolidated Statements of Funds From Operations and Normalized Funds From Operations
(Amounts in thousands except per share data)
(Unaudited)
 
Six Months Ended June 30, Quarter Ended June 30,
2013 2012 2013 2012
Net income $ 1,397,766 $ 260,482 $ 336,732 $ 108,315
Net loss (income) attributable to Noncontrolling Interests –
Partially Owned Properties 790 (769 ) 815 (319 )
Preferred distributions   (2,072 )   (6,933 )   (1,036 )   (3,467 )
Net income available to Common Shares and Units 1,396,484 252,780 336,511 104,529
 
Adjustments:
Depreciation 528,328 289,273 327,985 145,438
Depreciation – Non-real estate additions (2,473 ) (2,781 ) (1,257 ) (1,427 )
Depreciation – Partially Owned and Unconsolidated Properties (2,508 ) (1,597 ) (1,493 ) (797 )
Discontinued operations:
Depreciation 22,160 58,833 2,465 27,560
Net (gain) on sales of discontinued operations (1,588,874 ) (204,053 ) (389,952 ) (71,097 )
Net incremental gain on sales of condominium units 7 49 7
Gain on sale of Equity Corporate Housing (ECH)   601     350     351     350  
FFO available to Common Shares and Units (1) (3) (4) 353,725 392,854 274,617 204,556
 
Adjustments (see page 26 for additional detail):
Asset impairment and valuation allowances
Property acquisition costs and write-off of pursuit costs 76,116 10,894 8,448 8,268
Debt extinguishment (gains) losses, including prepayment penalties, preferred share
redemptions and non-cash convertible debt discounts 78,820 1,377 (823 ) 1,418
(Gains) losses on sales of non-operating assets, net of income and other tax expense
(benefit) (15,224 ) (491 ) (14,974 ) (487 )
Other miscellaneous non-comparable items       2,223         1,249  
Normalized FFO available to Common Shares and Units (2) (3) (4) $ 493,437   $ 406,857   $ 267,268   $ 215,004  
 
FFO (1) (3) $ 355,797 $ 399,787 $ 275,653 $ 208,023
Preferred distributions   (2,072 )   (6,933 )   (1,036 )   (3,467 )
FFO available to Common Shares and Units - basic and diluted (1) (3) (4) $ 353,725   $ 392,854   $ 274,617   $ 204,556  
FFO per share and Unit - basic $ 0.98   $ 1.25   $ 0.74   $ 0.65  
FFO per share and Unit - diluted $ 0.97   $ 1.24   $ 0.73   $ 0.64  
 
Normalized FFO (2) (3) $ 495,509 $ 413,790 $ 268,304 $ 218,471
Preferred distributions   (2,072 )   (6,933 )   (1,036 )   (3,467 )
Normalized FFO available to Common Shares and Units - basic and diluted (2) (3) (4) $ 493,437   $ 406,857   $ 267,268   $ 215,004  
Normalized FFO per share and Unit - basic $ 1.36   $ 1.30   $ 0.72   $ 0.68  
Normalized FFO per share and Unit - diluted $ 1.35   $ 1.29   $ 0.71   $ 0.68  
 
Weighted average Common Shares and Units outstanding - basic   362,390     313,133     373,403     314,255  
Weighted average Common Shares and Units outstanding - diluted   364,867     316,457     375,910     317,648  
 
Note:   See page 26 for additional detail regarding the adjustments from FFO to Normalized FFO. See page 29 for the definitions, the footnotes referenced above and the reconciliations of EPS to FFO and Normalized FFO.
   
Equity Residential
Consolidated Balance Sheets
(Amounts in thousands except for share amounts)
(Unaudited)
 
June 30, December 31,
2013 2012
ASSETS
Investment in real estate
Land $ 6,264,787 $ 4,554,912
Depreciable property 19,568,973 15,711,944
Projects under development 585,749 387,750
Land held for development   569,398     353,823  
Investment in real estate 26,988,907 21,008,429
Accumulated depreciation   (4,547,327 )   (4,912,221 )
Investment in real estate, net 22,441,580 16,096,208
Cash and cash equivalents 152,564 612,590
Investments in unconsolidated entities 188,582 17,877
Deposits – restricted 197,267 250,442
Escrow deposits – mortgage 41,357 9,129
Deferred financing costs, net 71,013 44,382
Other assets   390,020     170,372  
Total assets $ 23,482,383   $ 17,201,000  
 
LIABILITIES AND EQUITY
Liabilities:
Mortgage notes payable $ 6,247,612 $ 3,898,369
Notes, net 5,475,954 4,630,875
Lines of credit
Accounts payable and accrued expenses 84,603 38,372
Accrued interest payable 86,083 76,223
Other liabilities 318,622 304,518
Security deposits 71,857 66,988
Distributions payable   150,846     260,176  
Total liabilities   12,435,577     9,275,521  
 
Commitments and contingencies
 
Redeemable Noncontrolling Interests – Operating Partnership   407,890     398,372  
Equity:
Shareholders’ equity:
Preferred Shares of beneficial interest, $0.01 par value;
100,000,000 shares authorized; 1,000,000 shares issued and
outstanding as of June 30, 2013 and December 31, 2012 50,000 50,000
Common Shares of beneficial interest, $0.01 par value;
1,000,000,000 shares authorized; 360,312,049 shares issued and
outstanding as of June 30, 2013 and 325,054,654 shares
issued and outstanding as of December 31, 2012 3,603 3,251
Paid in capital 8,496,027 6,542,355
Retained earnings 1,939,598 887,355
Accumulated other comprehensive (loss)   (166,844 )   (193,148 )
Total shareholders’ equity 10,322,384 7,289,813
Noncontrolling Interests:
Operating Partnership 209,039 159,606
Partially Owned Properties   107,493     77,688  
Total Noncontrolling Interests   316,532     237,294  
Total equity   10,638,916     7,527,107  
Total liabilities and equity $ 23,482,383   $ 17,201,000  
       
Equity Residential
               
Portfolio Summary as of December 31, 2012 Portfolio Summary as of June 30, 2013
% of Average % of Average
Apartment Stabilized Rental Apartment Stabilized Rental
Markets/Metro Areas Properties Units NOI (1) Rate (2) Properties Units NOI (1) Rate (2)
 
Core:
Washington DC 43 14,425 15.9% $ 1,992 56 18,275 19.4% $ 2,260
New York 30 8,047 13.9% 3,433 38 10,330 16.9% 3,687
San Francisco 40 9,094 8.6% 1,902 50 12,765 11.7% 2,115
Los Angeles 48 9,815 9.9% 1,879 57 11,960 11.2% 2,053
Boston 26 5,832 8.2% 2,560 34 7,816 10.2% 2,774
South Florida 36 12,253 9.0% 1,463 33 10,833 7.0% 1,525
Seattle 38 7,563 6.4% 1,627 40 7,896 5.9% 1,705
San Diego 14 4,963 5.0% 1,851 15 4,915 4.4% 1,892
Denver 24 8,144 5.5% 1,226 19 6,935 4.2% 1,292
Orange County, CA 11 3,490 3.3%   1,660 11 3,490 2.8%   1,689
Subtotal – Core 310 83,626 85.7% 1,941 353 95,215 93.7% 2,172
 
Non-Core:
Inland Empire, CA 10 3,081 2.4% 1,491 10 3,081 2.1% 1,515
Orlando 21 6,413 3.5% 1,086 10 3,383 1.7% 1,132
New England (excluding Boston) 14 2,611 1.3% 1,174 11 1,965 0.8% 1,226
Phoenix 25 7,400 3.4% 946 6 2,040 0.7% 900
Atlanta 12 3,616 2.0% 1,157 4 1,343 0.6% 1,268
Tacoma, WA 3 1,467 0.6% 951 2 1,236 0.4% 1,030
Jacksonville 6 2,117 1.1%   1,005  
Subtotal – Non-Core 91 26,705 14.3%   1,099 43 13,048 6.3%   1,206
Total 401 110,331 100.0%   1,737 396 108,263 100.0%   2,055
 
Military Housing 2 5,039   2 5,125  
 
Grand Total 403 115,370 100.0% $ 1,737 398 113,388 100.0% $ 2,055
 
Note: Projects under development are not included in the Portfolio Summary until construction has been completed.
 
(1) % of Stabilized NOI includes budgeted 2013 NOI for stabilized properties, budgeted year one (March 2013 to February 2014) NOI for the Archstone properties and projected annual NOI at stabilization (defined as having achieved 90% occupancy for three consecutive months) for properties that are in lease-up.
 
(2) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the last month of the period presented.
                     
Equity Residential
           
Portfolio as of June 30, 2013
 
Apartment
Properties Units
Wholly Owned Properties 373 103,322
Master-Leased Properties - Consolidated 3 853
Partially Owned Properties - Consolidated 19 3,752
Partially Owned Properties - Unconsolidated 1 336

Military Housing

2     5,125  
 
398     113,388  
                       
 
Portfolio Rollforward Q2 2013
($ in thousands)
 
Apartment Purchase/
Properties Units (Sale) Price Cap Rate
3/31/2013 416 118,778
Acquisitions:
Consolidated:
Rental Properties 1 322 $ 91,500 4.7 %
Land Parcel (one) $ 16,500
Dispositions:
Consolidated:
Rental Properties (19 ) (5,745 ) $ (729,895 ) 6.1 %
Land Parcels (five) $ (59,750 )
Other (1) $ (30,734 )
Configuration Changes   33  
 
6/30/2013 398   113,388  
                       
 
Portfolio Rollforward 2013
($ in thousands)
 
Apartment Purchase/
Properties Units (Sale) Price Cap Rate
12/31/2012 403 115,370
Acquisitions:
Consolidated:
Rental Properties (2) 73 20,914 $ 8,524,427 4.9 %
Master-Leased Properties (2) 3 853 $ 250,752 5.6 %
Uncompleted Developments (two) $ 36,583
Land Parcels (fourteen) (2) $ 255,918
Unconsolidated (3):
Rental Properties 1 336 $ 5,113 5.8 %
Uncompleted Developments (two) (2) $ 14,854
Land Parcel (one) $ 4,097
Dispositions:
Consolidated:
Rental Properties (82 ) (24,197 ) $ (3,705,082 ) 6.0 %
Land Parcels (five) $ (59,750 )
Other (1) $ (30,734 )
Configuration Changes   112  
 
6/30/2013 398   113,388  
 
(1)   Represents a 97,000 square foot commercial building adjacent to our Harbor Steps apartment property in downtown Seattle that was acquired in 2011.
 
(2) Amounts have been adjusted to reflect Q2 2013 changes to the purchase price allocation for certain assets which were acquired in the Archstone transaction.
 
(3) EQR owns various equity interests in these unconsolidated rental properties, uncompleted developments and land parcels. Purchase price listed is EQR's net investment price.
                     
Equity Residential
           
Second Quarter 2013 vs. Second Quarter 2012
Same Store Results/Statistics for 85,509 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
 
Results Statistics
 
Average
Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
 
Q2 2013 $ 461,195 $ 158,469 $ 302,726 $ 1,884 95.5 % 14.9 %
Q2 2012 $ 439,744   $ 153,009   $ 286,735   $ 1,803   95.2 % 15.1 %
 
Change $ 21,451   $ 5,460   $ 15,991   $ 81   0.3 % (0.2 %)
 
Change 4.9 % 3.6 % 5.6 % 4.5 %
                         
 
Second Quarter 2013 vs. First Quarter 2013
Same Store Results/Statistics for 87,238 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
 
Results Statistics

 

Average
Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
 
Q2 2013 $ 477,378 $ 164,076 $ 313,302 $ 1,912 95.5 % 14.9 %
Q1 2013 $ 467,083   $ 166,462   $ 300,621   $ 1,881   95.0 % 12.3 %
 
Change $ 10,295   $ (2,386 ) $ 12,681   $ 31   0.5 % 2.6 %
 
Change 2.2 % (1.4 %) 4.2 % 1.6 %
                         
 
June YTD 2013 vs. June YTD 2012
Same Store Results/Statistics for 84,965 Same Store Apartment Units
$ in thousands (except for Average Rental Rate)
 
Results Statistics
 
Average
Rental
Description Revenues Expenses NOI (1) Rate (2) Occupancy Turnover
 
YTD 2013 $ 906,902 $ 317,324 $ 589,578 $ 1,869 95.3 % 27.2 %
YTD 2012 $ 864,071   $ 306,986   $ 557,085   $ 1,787   95.0 % 27.2 %
 
Change $ 42,831   $ 10,338   $ 32,493   $ 82   0.3 % 0.0 %
 
Change 5.0 % 3.4 % 5.8 % 4.6 %
 
(1)   The Company's primary financial measure for evaluating each of its apartment communities is net operating income ("NOI"). NOI represents rental income less property and maintenance expense, real estate tax and insurance expense and property management expense. The Company believes that NOI is helpful to investors as a supplemental measure of its operating performance because it is a direct measure of the actual operating results of the Company's apartment communities. See page 29 for reconciliations from operating income.
 
(2) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
                                     
Equity Residential
Second Quarter 2013 vs. Second Quarter 2012
Same Store Results/Statistics by Market
                 
Increase (Decrease) from Prior Year's Quarter

 

Q2 2013 Q2 2013 Q2 2013
% of Average Weighted Average
Apartment Actual Rental Average Rental
Markets/Metro Areas Units NOI Rate (1) Occupancy % Revenues Expenses NOI Rate (1) Occupancy
 
Core:
Washington DC 10,564 14.7 % $ 2,107 95.2 % 2.3 % 0.8 % 3.0 % 2.7 % (0.4 %)
New York 7,176 14.2 % 3,461 96.1 % 4.7 % 6.2 % 3.7 % 4.9 % (0.2 %)
Los Angeles 8,996 10.9 % 1,918 95.6 % 4.8 % 5.0 % 4.7 % 3.8 % 0.9 %
Boston (2) 5,832 9.9 % 2,636 95.3 % 4.7 % 3.4 % 5.4 % 4.8 % (0.1 %)
South Florida 10,637 9.5 % 1,519 95.5 % 4.8 % 2.4 % 6.2 % 4.1 % 0.5 %
San Francisco 7,943 9.5 % 1,913 95.4 % 9.1 % 1.6 % 13.3 % 8.8 % 0.2 %
Seattle 7,029 7.5 % 1,695 95.5 % 5.6 % 4.5 % 6.2 % 5.3 % 0.3 %
Denver 6,767 5.6 % 1,278 95.9 % 7.7 % 10.1 % 6.6 % 7.1 % 0.6 %
San Diego 4,627 5.5 % 1,847 95.8 % 4.0 % 3.4 % 4.2 % 2.8 % 1.0 %
Orange County, CA 3,490 3.9 % 1,689 95.6 % 3.7 % 0.8 % 5.0 % 3.5 % 0.2 %
Subtotal – Core 73,061 91.2 % 2,000 95.6 % 4.9 % 3.8 % 5.6 % 4.7 % 0.3 %
 
Non-Core:
Inland Empire, CA 3,081 3.0 % 1,508 95.4 % 4.3 % 4.0 % 4.4 % 3.6 % 0.7 %
Orlando 3,383 2.3 % 1,123 95.6 % 4.7 % 0.6 % 7.3 % 4.1 % 0.6 %
New England (excluding Boston) 1,965 1.2 % 1,221 95.1 % 2.1 % 4.8 % (0.3 %) 2.9 % (0.7 %)
Phoenix 1,776 0.9 % 894 95.0 % 1.4 % (0.8 %) 2.8 % 1.0 % 0.5 %
Atlanta 1,007 0.7 % 1,244 95.5 % 3.1 % (1.4 %) 6.5 % 3.8 % (0.7 %)
Tacoma, WA 1,236 0.7 % 1,021 94.5 % 11.5 % (1.6 %) 23.7 % 3.7 % 6.6 %
Subtotal – Non-Core 12,448 8.8 % 1,201 95.3 % 4.2 % 1.8 % 5.8 % 3.3 % 0.9 %
                 
Total 85,509 100.0 % $ 1,884 95.5 % 4.9 % 3.6 % 5.6 % 4.5 % 0.3 %
 
(1) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
 
(2) Quarter over quarter same store revenues in Boston were negatively impacted by non-residential related income. Residential-only revenues increased in Boston 5.4% quarter over quarter.
                 
Equity Residential
Second Quarter 2013 vs. First Quarter 2013
Same Store Results/Statistics by Market
 
Increase (Decrease) from Prior Quarter

 

Q2 2013 Q2 2013 Q2 2013
% of Average Weighted Average
Apartment Actual Rental Average Rental
Markets/Metro Areas Units NOI Rate (1) Occupancy % Revenues Expenses NOI Rate (1) Occupancy
 
Core:
New York 7,687 15.3 % $ 3,568 96.1 % 1.5 % (4.6 %) 5.8 % 0.6 % 0.8 %
Washington DC 11,077 15.2 % 2,154 95.2 % 2.1 % (2.1 %) 4.0 % 1.3 % 0.7 %
Los Angeles 9,095 10.7 % 1,922 95.5 % 1.2 % (1.5 %) 2.6 % 1.4 % (0.2 %)
San Francisco 8,381 9.7 % 1,938 95.3 % 3.6 % (2.9 %) 7.3 % 2.7 % 0.8 %
Boston (2) 5,832 9.5 % 2,636 95.3 % 4.1 % (5.6 %) 9.3 % 2.9 % 1.0 %
South Florida 10,637 9.2 % 1,519 95.5 % 1.8 % 1.3 % 2.1 % 1.3 % 0.3 %
Seattle 7,029 7.2 % 1,695 95.5 % 2.2 % 0.7 % 2.9 % 1.6 % 0.6 %
Denver 6,935 5.6 % 1,281 95.8 % 2.2 % 12.6 % (1.9 %) 2.1 % 0.1 %
San Diego 4,627 5.3 % 1,847 95.8 % 3.3 % 3.7 % 3.2 % 1.2 % 2.1 %
Orange County, CA 3,490 3.8 % 1,689 95.6 % 1.7 % (4.2 %) 4.4 % 1.5 % 0.2 %
Subtotal – Core 74,790 91.5 % 2,030 95.5 % 2.3 % (1.5 %) 4.3 % 1.7 % 0.6 %
 
Non-Core:
Inland Empire, CA 3,081 2.9 % 1,508 95.4 % 2.5 % 4.9 % 1.4 % 1.5 % 0.8 %
Orlando 3,383 2.2 % 1,123 95.6 % 1.0 % (0.7 %) 2.1 % 1.6 % (0.6 %)
New England (excluding Boston) 1,965 1.1 % 1,221 95.1 % 1.4 % (7.8 %) 11.7 % 1.1 % 0.3 %
Phoenix 1,776 0.9 % 894 95.0 % 0.1 % 1.1 % (0.5 %) 0.1 % (0.1 %)
Atlanta 1,007 0.7 % 1,244 95.5 % 2.7 % 3.7 % 1.9 % 2.6 % 0.0 %
Tacoma, WA 1,236 0.7 % 1,021 94.5 % 2.1 % (8.1 %) 11.3 % 2.2 % (0.1 %)
Subtotal – Non-Core 12,448 8.5 % 1,201 95.3 % 1.7 % (1.0 %) 3.4 % 1.5 % 0.1 %
                 
Total 87,238 100.0 % $ 1,912 95.5 % 2.2 % (1.4 %) 4.2 % 1.6 % 0.5 %
 
(1) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
 
(2) Sequential same store revenues in Boston were positively impacted by non-residential related income. Residential-only revenues increased in Boston 2.7% sequentially.
                                     
Equity Residential
June YTD 2013 vs. June YTD 2012
Same Store Results/Statistics by Market
                 
Increase (Decrease) from Prior Year

 

June YTD 13 June YTD 13
% of Average June YTD 13 Average
Apartment Actual Rental Weighted Average Rental
Markets/Metro Areas Units NOI Rate (1) Occupancy % Revenues Expenses NOI Rate (1) Occupancy
 
Core:
Washington DC 10,564 14.8 % $ 2,095 94.9 % 3.0 % 0.4 % 4.1 % 3.2 % (0.2 %)
New York 7,176 14.2 % 3,455 95.7 % 5.1 % 6.0 % 4.5 % 5.3 % (0.1 %)
Los Angeles 8,894 10.9 % 1,900 95.6 % 4.7 % 4.3 % 4.8 % 3.9 % 0.7 %
South Florida 10,637 9.7 % 1,509 95.3 % 4.7 % 1.9 % 6.4 % 4.3 % 0.3 %
Boston (2) 5,832 9.7 % 2,599 94.8 % 4.0 % 5.8 % 3.1 % 4.2 % (0.1 %)
San Francisco 7,820 9.3 % 1,892 95.0 % 9.2 % 2.0 % 13.4 % 8.6 % 0.4 %
Seattle 6,710 7.2 % 1,677 95.2 % 5.6 % 3.6 % 6.7 % 5.6 % 0.1 %
Denver 6,767 5.9 % 1,265 95.8 % 8.1 % 5.1 % 9.5 % 7.6 % 0.4 %
San Diego 4,627 5.6 % 1,837 94.8 % 3.6 % 2.7 % 4.0 % 2.9 % 0.6 %
Orange County, CA 3,490 3.9 % 1,676 95.5 % 4.1 % 3.7 % 4.3 % 3.8 % 0.2 %
Subtotal – Core 72,517 91.2 % 1,985 95.3 % 5.0 % 3.6 % 5.8 % 4.7 % 0.2 %
 
Non-Core:
Inland Empire, CA 3,081 3.0 % 1,497 95.0 % 3.6 % 1.1 % 4.8 % 3.0 % 0.6 %
Orlando 3,383 2.3 % 1,114 95.9 % 5.3 % 0.2 % 8.5 % 4.5 % 0.7 %
New England (excluding Boston) 1,965 1.1 % 1,215 95.0 % 2.9 % 6.7 % (0.7 %) 3.1 % (0.1 %)
Phoenix 1,776 1.0 % 893 95.0 % 2.0 % (1.9 %) 4.5 % 1.5 % 0.5 %
Atlanta 1,007 0.7 % 1,228 95.5 % 4.5 % (1.7 %) 9.2 % 5.1 % (0.6 %)
Tacoma, WA 1,236 0.7 % 1,010 94.6 % 7.0 % (0.3 %) 13.8 % 1.9 % 4.6 %
Subtotal – Non-Core 12,448 8.8 % 1,192 95.2 % 4.1 % 1.3 % 5.9 % 3.2 % 0.8 %
                 
Total 84,965 100.0 % $ 1,869 95.3 % 5.0 % 3.4 % 5.8 % 4.6 % 0.3 %
 
(1) Average rental rate is defined as total rental revenues divided by the weighted average occupied apartment units for the period.
 
(2) June year over year same store revenues in Boston were negatively impacted by non-residential related income. Residential-only revenues increased in Boston 5.7% June year over year.
 
Equity Residential
         
Second Quarter 2013 vs. Second Quarter 2012
Same Store Operating Expenses for 85,509 Same Store Apartment Units
$ in thousands
 
% of Actual
Q2 2013
Actual Actual $ % Operating
Q2 2013 Q2 2012 Change Change Expenses
 
Real estate taxes $ 51,875 $ 48,219 $ 3,656 7.6 % 32.7 %
On-site payroll (1) 34,134 33,537 597 1.8 % 21.5 %
Utilities (2) 23,199 22,182 1,017 4.6 % 14.6 %
Repairs and maintenance (3) 22,002 21,173 829 3.9 % 13.9 %
Property management costs (4) 15,681 16,490 (809 ) (4.9 %) 9.9 %
Insurance 4,820 4,811 9 0.2 % 3.1 %
Leasing and advertising 2,614 2,426 188 7.7 % 1.7 %
Other on-site operating expenses (5)   4,144   4,171   (27 ) (0.6 %) 2.6 %
 
Same store operating expenses $ 158,469 $ 153,009 $ 5,460   3.6 % 100.0 %
                     
 
June YTD 2013 vs. June YTD 2012
Same Store Operating Expenses for 84,965 Same Store Apartment Units
$ in thousands

 

 

 

 

% of Actual
YTD 2013
Actual Actual $ % Operating
YTD 2013 YTD 2012 Change Change Expenses
 
Real estate taxes $ 102,540 $ 95,786 $ 6,754 7.1 % 32.3 %
On-site payroll (1) 68,110 67,705 405 0.6 % 21.5 %
Utilities (2) 48,523 46,354 2,169 4.7 % 15.3 %
Repairs and maintenance (3) 42,778 40,663 2,115 5.2 % 13.5 %
Property management costs (4) 30,835 32,403 (1,568 ) (4.8 %) 9.7 %
Insurance 10,167 9,559 608 6.4 % 3.2 %
Leasing and advertising 4,997 4,697 300 6.4 % 1.6 %
Other on-site operating expenses (5)   9,374   9,819   (445 ) (4.5 %) 2.9 %
 
Same store operating expenses $ 317,324 $ 306,986 $ 10,338   3.4 % 100.0 %

 

(1)   On-site payroll - Includes payroll and related expenses for on-site personnel including property managers, leasing consultants and maintenance staff.
 
(2) Utilities - Represents gross expenses prior to any recoveries under the Resident Utility Billing System ("RUBS"). Recoveries are reflected in rental income.
 
(3) Repairs and maintenance - Includes general maintenance costs, apartment unit turnover costs including interior painting, routine landscaping, security, exterminating, fire protection, snow removal, elevator, roof and parking lot repairs and other miscellaneous building repair costs.
 
(4) Property management costs - Includes payroll and related expenses for departments, or portions of departments, that directly support on-site management. These include such departments as regional and corporate property management, property accounting, human resources, training, marketing and revenue management, procurement, real estate tax, property legal services and information technology.
 
(5) Other on-site operating expenses - Includes ground lease costs and administrative costs such as office supplies, telephone and data charges and association and business licensing fees.
                             
Equity Residential
         
Debt Summary as of June 30, 2013
(Amounts in thousands)
 
Weighted
Weighted Average
% of Average Maturities
Amounts (1) Total Rates (1) (years)
 
Secured $ 6,247,612 53.3 % 4.37 % 7.0
Unsecured   5,475,954 46.7 % 4.94 % 5.0  
 
Total $ 11,723,566 100.0 % 4.65 % 6.1  
 
Fixed Rate Debt:
Secured – Conventional $ 5,565,166 47.5 % 4.79 % 5.5
Unsecured – Public/Private   4,725,954 40.3 % 5.64 % 5.6  
 
Fixed Rate Debt   10,291,120 87.8 % 5.19 % 5.5  
 
Floating Rate Debt:
Secured – Conventional 57,261 0.5 % 2.34 % 1.3
Secured – Tax Exempt 625,185 5.3 % 0.60 % 19.6
Unsecured – Public/Private 750,000 6.4 % 1.81 % 1.5
Unsecured – Revolving Credit Facility     1.27 % 4.8  
 
Floating Rate Debt   1,432,446 12.2 % 1.30 % 9.6  
 
Total $ 11,723,566 100.0 % 4.65 % 6.1  
 
(1) Net of the effect of any derivative instruments. Weighted average rates are for the six months ended June 30, 2013.
 
Note: The Company capitalized interest of approximately $20.0 million and $10.1 million during the six months ended June 30, 2013 and 2012, respectively. The Company capitalized interest of approximately $11.6 million and $5.1 million during the quarters ended June 30, 2013 and 2012, respectively.
                             
 
Debt Maturity Schedule as of June 30, 2013
(Amounts in thousands)

 

 

Weighted Weighted
Average Rates Average
Fixed Floating % of on Fixed Rates on
Year Rate (1) Rate (1) Total Total Rate Debt (1) Total Debt (1)
 
2013 $ 5,614 $ 259 $ 5,873 0.1 % 5.47 % 5.38 %
2014 1,517,354 49,017 1,566,371 13.4 % 5.67 % 5.57 %
2015 419,785 750,000 (2) 1,169,785 10.0 % 6.29 % 3.14 %
2016 1,192,559 1,192,559 10.2 % 5.34 % 5.34 %
2017 2,171,013 (3) 456 2,171,469 18.5 % 6.20 % 6.20 %
2018 83,599 724 84,323 0.7 % 5.63 % 5.63 %
2019 805,844 20,766 826,610 7.1 % 5.48 % 5.35 %
2020 1,677,783 809 1,678,592 14.3 % 5.49 % 5.49 %
2021 1,194,390 856 1,195,246 10.2 % 4.64 % 4.64 %
2022 228,045 905 228,950 1.9 % 3.17 % 3.18 %
2023+ 806,868 675,944 1,482,812 12.6 % 4.23 % 2.51 %
Premium/(Discount)   188,266   (67,290 )   120,976 1.0 % N/A   N/A  
 
Total $ 10,291,120 $ 1,432,446   $ 11,723,566

100.0

% 5.43 % 4.86 %
 
(1) Net of the effect of any derivative instruments. Weighted average rates are as of June 30, 2013.
 
(2) Includes the Company's senior unsecured $750.0 million delayed draw term loan facility that matures on January 11, 2015 and is subject to a one-year extension option exercisable by the Company.
 
(3) Includes $1.27 billion in Archstone mortgage notes payable of which all or a portion of can be modified and extended to mature in 2023 under certain circumstances. The Company and the lender are in the process of modifying and extending this debt.
                     
Equity Residential
Unsecured Debt Summary as of June 30, 2013
(Amounts in thousands)
   

 

 

 

 

   

 

Unamortized
Coupon Due Face Premium/ Net
Rate Date Amount (Discount) Balance
 
Fixed Rate Notes:
5.250 % 9/15/14 $ 500,000 $ (74) $ 499,926
6.584 % 4/13/15 300,000 (193) 299,807
5.125 % 3/15/16 500,000 (144) 499,856
5.375 % 8/1/16 400,000 (572) 399,428
5.750 % 6/15/17 650,000 (2,034) 647,966
7.125 % 10/15/17 150,000 (278) 149,722
4.750 % 7/15/20 600,000 (3,205) 596,795
4.625 % 12/15/21 1,000,000 (3,207) 996,793
3.000 % 4/15/23 500,000 (4,339) 495,661
7.570 % 8/15/26   140,000     140,000
 
  4,740,000   (14,046)   4,725,954
Floating Rate Notes:
Delayed Draw Term Loan Facility LIBOR+1.20% 1/11/15 (1)(2)   750,000     750,000
 
  750,000     750,000
 
Revolving Credit Facility: LIBOR+1.05% 4/1/18 (1)(3)      
 
Total Unsecured Debt $ 5,490,000 $ (14,046) $ 5,475,954
 
(1)   Facilities are private. All other unsecured debt is public.
 
(2) On January 11, 2013, the Company entered into a senior unsecured $750.0 million delayed draw term loan facility which was fully drawn on February 27, 2013 in connection with the Archstone acquisition. The maturity date of January 11, 2015 is subject to a one-year extension option exercisable by the Company. The interest rate on advances under the term loan facility will generally be LIBOR plus a spread (currently 1.20%), which is dependent on the credit rating of the Company's long-term debt.
 
(3) On January 11, 2013, the Company replaced its existing $1.75 billion facility with a $2.5 billion unsecured revolving credit facility maturing April 1, 2018. The interest rate on advances under the new credit facility will generally be LIBOR plus a spread (currently 1.05%) and an annual facility fee (currently 15 basis points). Both the spread and the facility fee are dependent on the credit rating of the Company's long-term debt. As of June 30, 2013, there was approximately $2.47 billion available on the Company's unsecured revolving credit facility.
 
Equity Residential
     
Selected Unsecured Public Debt Covenants
 
June 30, March 31,
2013 2013
 
Total Debt to Adjusted Total Assets (not to exceed 60%) 42.9% 44.2%
 
Secured Debt to Adjusted Total Assets (not to exceed 40%) 22.9% 23.2%
 
Consolidated Income Available for Debt Service to
Maximum Annual Service Charges
(must be at least 1.5 to 1) 2.68 2.70
 
Total Unsecured Assets to Unsecured Debt 315.4% 297.7%
(must be at least 150%)
 

These selected covenants relate to ERP Operating Limited Partnership's ("ERPOP") outstanding unsecured public debt. Equity Residential is the general partner of ERPOP.

                               
Equity Residential
               
Capital Structure as of June 30, 2013
(Amounts in thousands except for share/unit and per share amounts)
 
Secured Debt $ 6,247,612 53.3%
Unsecured Debt   5,475,954 46.7%
 
Total Debt 11,723,566 100.0% 35.0%
 
Common Shares (includes Restricted Shares) 360,312,049 96.2%
Units (includes OP Units and LTIP Units)   14,214,427   3.8%
 
Total Shares and Units 374,526,476 100.0%
Common Share Price at June 30, 2013 $ 58.06
21,745,007 99.8%
Perpetual Preferred Equity (see below)   50,000 0.2%
 
Total Equity 21,795,007 100.0% 65.0%
 
Total Market Capitalization $ 33,518,573 100.0%
                               
 
Perpetual Preferred Equity as of June 30, 2013
(Amounts in thousands except for share and per share amounts)

 

 

 

Annual Annual
Redemption Outstanding Liquidation Dividend Dividend
Series Date Shares Value Per Share Amount
 
Preferred Shares:
8.29% Series K 12/10/2026 1,000,000 $ 50,000 $ 4.145 $ 4,145
 
Total Perpetual Preferred Equity 1,000,000 $ 50,000 $ 4,145
                 
Equity Residential
Common Share and Unit
Weighted Average Amounts Outstanding
       
YTD Q213 YTD Q212 Q213 Q212
 
Weighted Average Amounts Outstanding for Net Income Purposes:
Common Shares - basic 348,653,658 299,499,337 359,652,775 300,193,311
Shares issuable from assumed conversion/vesting of (1):
- OP Units
- long-term compensation shares/units
 
Total Common Shares and Units - diluted (1) 348,653,658 299,499,337 359,652,775 300,193,311
 
Weighted Average Amounts Outstanding for FFO and Normalized

FFO Purposes:

Common Shares - basic 348,653,658 299,499,337 359,652,775 300,193,311
OP Units - basic 13,736,305 13,633,531 13,750,043 14,061,763
 
Total Common Shares and OP Units - basic 362,389,963 313,132,868 373,402,818 314,255,074
Shares issuable from assumed conversion/vesting of:
- long-term compensation shares/units 2,477,194 3,324,096 2,507,261 3,392,527
 
Total Common Shares and Units - diluted 364,867,157 316,456,964 375,910,079 317,647,601
 
Period Ending Amounts Outstanding:
Common Shares (includes Restricted Shares) 360,312,049 300,961,645
Units (includes OP Units and LTIP Units) 14,214,427 14,508,752
 
Total Shares and Units 374,526,476 315,470,397
 
(1)   Potential common shares issuable from the assumed conversion of OP Units and the exercise/vesting of long-term compensation shares/units are automatically anti-dilutive and therefore excluded from the diluted earnings per share calculation as the Company had a loss from continuing operations during the six months and quarters ended June 30, 2013 and 2012.
                         
Equity Residential
Partially Owned Entities as of June 30, 2013
(Amounts in thousands except for project and apartment unit amounts)
           
Consolidated Unconsolidated

 

 

Development Projects

Development Projects

 

 
Held for Held for
and/or Under and/or Under
Development (4) Operating Total Development (5) Operating Total
 
Total projects (1)       19     19         1     1  
 
Total apartment units (1)       3,752     3,752         336     336  
 
Operating information for the six months ended 6/30/13 (at 100%):
Operating revenue $ $ 38,352 $ 38,352 $ 1,203 $ 1,610 $ 2,813
Operating expenses   179     12,293     12,472     1,091     671     1,762  
 
Net operating (loss) income (179 ) 26,059 25,880 112 939 1,051
Depreciation 17,056 17,056 2,158 2,158
General and administrative/other   503     31     534     11         11  
 
Operating (loss) income (682 ) 8,972 8,290 101 (1,219 ) (1,118 )
Interest and other income 1 3 4 2 2
Other expenses (181 ) (3 ) (184 )
Interest:
Expense incurred, net (6,712 ) (6,712 ) (208 ) (373 ) (581 )
Amortization of deferred financing costs       (131 )   (131 )            
 
(Loss) income before income and other taxes, (loss) from
investments in unconsolidated entities, net (loss)
gain on sales of land parcels and discontinued
operations (862 ) 2,129 1,267 (107 ) (1,590 ) (1,697 )
Income and other tax (expense) benefit (11 ) (56 ) (67 )
(Loss) from investments in unconsolidated entities (342 ) (342 )
Net (loss) on sales of land parcels (17 ) (17 )
Net gain on sales of discontinued operations 26,686 26,686
           
Net (loss) income $ (890 ) $ 28,417   $ 27,527   $ (107 ) $ (1,590 ) $ (1,697 )
 
Debt - Secured (2):
EQR Ownership (3) $ $ 280,625 $ 280,625 $ 47,234 $ 6,110 $ 53,344
Noncontrolling Ownership       78,007     78,007     98,533     24,440     122,973  
 
Total (at 100%) $   $ 358,632   $ 358,632   $ 145,767   $ 30,550   $ 176,317  
 
(1)   Project and apartment unit counts exclude all uncompleted development projects until those projects are substantially completed.
 
(2) All debt is non-recourse to the Company with the exception of 50% of the current $2.7 million outstanding debt balance on one unconsolidated development project.
 
(3) Represents the Company's current equity ownership interest.
 
(4) See Projects Under Development - Partially Owned on page 22 for further information.
 
(5) See Projects Under Development - Unconsolidated on page 23 for further information.
 
Note: The above table excludes the Company's interests in unconsolidated joint ventures entered into with AvalonBay ("AVB") in connection with the Archstone transaction. These ventures own certain non-core Archstone assets that are held for sale and succeeded to certain residual Archstone liabilities, such as liability for various employment-related matters as well as responsibility for tax protection arrangements and third-party preferred interests in former Archstone subsidiaries. The preferred interests have an aggregate liquidation value of $88.3 million at June 30, 2013. The ventures are owned 60% by the Company and 40% by AVB.
                                             
Equity Residential
Consolidated Development and Lease-Up Projects as of June 30, 2013
(Amounts in thousands except for project and apartment unit amounts)
                       

 

Total Book
No. of Total Total Value Not Estimated Estimated
Apartment Capital Book Value Placed in Total Percentage Percentage Percentage Completion Stabilization

Projects

Location Units Cost (1) to Date Service Debt Completed Leased Occupied Date Date
 

Projects Under Development - Wholly Owned:

Breakwater at Marina Del Rey (2) (3) (4) Marina Del Rey, CA 224 $ 90,449 $ 81,819 $ 2,273 $ 27,000 89% 54% 50% Q3 2013 Q1 2014
Jia (formerly Chinatown Gateway) Los Angeles, CA 280 92,920 66,796 66,796 69% Q3 2013 Q2 2015
Oasis at Delray (formerly Delray Beach II) (5) Delray Beach, FL 128 23,739 14,861 14,861 70% Q1 2014 Q2 2014
Westgate II Pasadena, CA 252 125,293 78,579 78,579 51% Q1 2014 Q1 2015
1111 Belle Pre (formerly The Madison) Alexandria, VA 360 115,072 81,388 81,388 75% Q1 2014 Q2 2015
Urbana (formerly Market Street Landing) Seattle, WA 287 90,024 56,896 56,896 60% Q1 2014 Q3 2015
Reserve at Town Center III Mill Creek, WA 95 21,330 10,005 10,005 41% Q2 2014 Q4 2014
Westgate III Pasadena, CA 88 54,037 26,322 26,322 19% Q2 2014 Q1 2015
170 Amsterdam (2) New York, NY 237   110,892   23,145   23,145   10% Q1 2015 Q1 2016
Projects Under Development - Wholly Owned 1,951 723,756 439,811 360,265 27,000
 

Projects Under Development - Partially Owned:

Park Aire (formerly Enclave at Wellington) (5) Wellington, FL 268 50,000 36,457 36,457 74% Q1 2014 Q1 2015
400 Park Avenue South (6) New York, NY 269   251,961   116,630   116,630   23% Q2 2015 Q1 2016
Projects Under Development - Partially Owned 537 301,961 153,087 153,087
         
Projects Under Development 2,488   1,025,717   592,898   513,352   27,000
 

Completed Not Stabilized - Wholly Owned (7):

2201 Pershing Drive Arlington, VA 188 63,242 58,414 92% 88% Completed Q3 2013
Gaithersburg Station (4) (8) Gaithersburg, MD 389   93,000   91,828     84,700 68% 60% Completed Q1 2014
Projects Completed Not Stabilized - Wholly Owned 577 156,242 150,242 84,700
         
Projects Completed Not Stabilized 577   156,242   150,242  

  84,700
 
Total Consolidated Projects 3,065 $ 1,181,959 $ 743,140 $ 513,352 $ 111,700
 
Land Held for Development N/A   N/A $ 569,398 $ 569,398 $

 

 

Total Capital

Q2 2013

NOI CONTRIBUTION FROM CONSOLIDATED DEVELOPMENT PROJECTS

Cost (1)

NOI

Projects Under Development $ 1,025,717 $ 6
Completed Not Stabilized 156,242 1,439
Completed and Stabilized During the Quarter    
Total Consolidated Development NOI Contribution $ 1,181,959 $ 1,445
 
(1) Total capital cost represents estimated cost for projects under development and/or developed and all capitalized costs incurred to date plus any estimates of costs remaining to be funded for all projects, all in accordance with GAAP.
 
(2) The land under this development is subject to a long term ground lease.
 
(3) The Company acquired this property, part of which is currently being renovated, in connection with the Archstone transaction. The non-recourse loan on this property has a current outstanding balance of $27.0 million, bears interest at LIBOR plus 1.75% and matures September 1, 2014.
 
(4) Amounts have been adjusted to reflect Q2 2013 changes to the purchase price allocation for these projects which were acquired in the Archstone transaction.
 
(5) The Company acquired this development project in connection with the Archstone transaction and is continuing development activities. The Company owns 100% of Oasis at Delray and has a 95.0% ownership interest in Park Aire.
 
(6) The Company is jointly developing with Toll Brothers (NYSE: TOL) a vacant land parcel at 400 Park Avenue South in New York City with the Company's rental portion on floors 2-22 and Toll's for sale portion on floors 23-40. The total capital cost and total book value to date represent only the Company's portion of the project. Toll Brothers has funded $72.4 million for their allocated share of the project.
 
(7) Properties included here are substantially complete. However, they may still require additional exterior and interior work for all apartment units to be available for leasing.
 
(8) The Company acquired this completed development project prior to stabilization in connection with the Archstone transaction and is continuing lease-up activities. This project has a non-recourse loan with a current outstanding balance of $84.7 million, bears interest at 5.24% and matures April 1, 2053.
                                                 
Equity Residential
Unconsolidated Development and Lease-Up Projects as of June 30, 2013
(Amounts in thousands except for project and apartment unit amounts)
                         
Total Book
No. of Total Total Value Not Estimated Estimated
Percentage Apartment Capital Book Value Placed in Total Percentage Percentage Percentage Completion Stabilization
Projects Location Ownership Units Cost (1) to Date Service Debt Completed Leased Occupied Date Date
 

Projects Under Development - Unconsolidated:

Nexus Sawgrass (formerly Sunrise Village) (2) Sunrise, FL 20.0% 501 $ 78,212 $ 73,867 $ 73,867 $ 42,583 97% 44% 30% Q3 2013 Q3 2014
San Norterra (3) Phoenix, AZ 85.0% 388 56,250 50,220 50,220 28,430 91% 50% 40% Q4 2013 Q2 2014
Domain (2) San Jose, CA 20.0% 444 154,570 134,407 134,407 72,093 85% 7% Q4 2013 Q4 2015
Parkside at Emeryville (4) (5) Emeryville, CA 5.0% 180   75,000   29,013   29,013   2,661 23% Q3 2014 Q4 2015
Projects Under Development - Unconsolidated 1,513 364,032 287,507 287,507 145,767
         
Projects Under Development 1,513   364,032   287,507   287,507   145,767
 
Total Unconsolidated Projects 1,513 $ 364,032 $ 287,507 $ 287,507 $ 145,767
 
Unconsolidated Land Held for Development N/A   N/A $ 17,415 $ 17,415 $
 
(1) Total capital cost represents estimated cost for projects under development and/or developed and all capitalized costs incurred to date plus any estimates of costs remaining to be funded for all projects, all in accordance with GAAP.
 
(2) These development projects are owned 20% by the Company and 80% by an institutional partner in two separate unconsolidated joint ventures. Total project costs are approximately $232.8 million and construction will be predominantly funded with two separate long-term, non-recourse secured loans from the partner. The Company is responsible for constructing the projects and has given certain construction cost overrun guarantees but currently has no further funding obligations. Nexus Sawgrass has a maximum debt commitment of $48.7 million, the loan bears interest at 5.60% and matures January 1, 2021. Domain has a maximum debt commitment of $98.6 million, the loan bears interest at 5.75% and matures January 1, 2022.
 
(3) The Company acquired this development project in connection with the Archstone transaction. Total project costs are approximately $56.3 million and construction is being partially funded with a non-recourse construction loan. San Norterra has a maximum debt commitment of $34.8 million, the loan bears interest at LIBOR plus 2.00% and matures January 6, 2015.
 
(4) The Company acquired this development project in connection with the Archstone transaction. Total project costs are approximately $75.0 million and construction is being partially funded with a construction loan. Parkside at Emeryville has a maximum debt commitment of $39.5 million, the loan bears interest at LIBOR plus 2.25% and matures August 14, 2015. The Company has given a repayment guaranty on the construction loan of 50% of the outstanding balance, up to a maximum of $19.7 million, and has given certain construction cost overrun guarantees.
 
(5) Amounts have been adjusted to reflect Q2 2013 changes to the purchase price allocation for this project which was acquired in the Archstone transaction.
                                                             
Equity Residential
Repairs and Maintenance Expenses and Capital Expenditures to Real Estate
For the Six Months Ended June 30, 2013
(Amounts in thousands except for apartment unit and per apartment unit amounts)
                             
Repairs and Maintenance Expenses Capital Expenditures to Real Estate Total Expenditures
Total Avg. Per Avg. Per Avg. Per Avg. Per Building Avg. Per Avg. Per Avg. Per
Apartment Apartment Payroll Apartment Apartment Replacements Apartment Improvements Apartment Apartment Grand Apartment
Units (1) Expense (2) Unit (3) Unit Total Unit (4) Unit (5) Unit Total Unit Total Unit
 
Same Store Properties (6) 84,965 $ 42,778 $ 503 $ 33,781 $ 398 $ 76,559 $ 901 $ 23,154 $ 273 $ 22,522 $ 265 $ 45,676 $ 538 (9) $ 122,235 $ 1,439
 
Non-Same Store Properties (7) 22,962 8,273 504 5,533 337 13,806 841 4,000 244 3,845 234 7,845 478 21,651 1,319
 
Other (8)   4,255   7,641   11,896   1,989   1,743   3,732   15,628
 
Total 107,927 $ 55,306 $ 46,955 $ 102,261 $ 29,143 $ 28,110 $ 57,253 $ 159,514
 
(1) Total Apartment Units - Excludes 336 unconsolidated apartment units and 5,125 military housing apartment units for which repairs and maintenance expenses and capital expenditures to real estate are self-funded and do not consolidate into the Company's results.
 
(2) Repairs and Maintenance Expenses - Includes general maintenance costs, apartment unit turnover costs including interior painting, routine landscaping, security, exterminating, fire protection, snow removal, elevator, roof and parking lot repairs and other miscellaneous building repair costs.
 
(3) Maintenance Payroll - Includes payroll and related expenses for maintenance staff.
 
(4) Replacements - Includes new expenditures inside the apartment units such as appliances, mechanical equipment, fixtures and flooring, including carpeting. Replacements for same store properties also include $9.5 million spent during the six months ended June 30, 2013 on apartment unit renovations/rehabs (primarily kitchens and baths) on 1,256 apartment units (equating to about $7,600 per apartment unit rehabbed) designed to reposition these assets for higher rental levels in their respective markets. In 2013, the Company expects to spend approximately $40.8 million rehabbing 5,000 apartment units (equating to about $8,150 per apartment unit rehabbed).
 
(5) Building Improvements - Includes roof replacement, paving, amenities and common areas, building mechanical equipment systems, exterior painting and siding, major landscaping, vehicles and office and maintenance equipment.
 
(6) Same Store Properties - Primarily includes all properties acquired or completed and stabilized prior to January 1, 2012, less properties subsequently sold.
 
(7) Non-Same Store Properties - Primarily includes all properties acquired during 2012 and 2013, plus any properties in lease-up and not stabilized as of January 1, 2012. Per apartment unit amounts are based on a weighted average of 16,416 apartment units. Includes approximately four months of activity for the Archstone properties.
 
(8) Other - Primarily includes expenditures for properties sold during the period.
 
(9) For 2013, the Company estimates that it will spend approximately $1,500 per apartment unit of capital expenditures for the approximately 80,000 apartment units that the Company expects to have in its annual same store set, inclusive of apartment unit renovation/rehab costs, or $1,150 per apartment unit excluding apartment unit renovation/rehab costs.
                 
Equity Residential
Discontinued Operations
(Amounts in thousands)
       
Six Months Ended Quarter Ended
June 30, June 30,
2013 2012 2013 2012
 
REVENUES
Rental income $ 73,144   $ 198,955   $ 8,313   $ 98,628  
 
Total revenues   73,144     198,955     8,313     98,628  
 
EXPENSES (1)
Property and maintenance 23,062 47,382 6,707 22,977
Real estate taxes and insurance 7,304 15,420 468 10,029
Property management 1 141 71
Depreciation 22,160 58,833 2,465 27,560
General and administrative   71     43     64     39  
 
Total expenses   52,598     121,819     9,704     60,676  
 
Discontinued operating income (loss) 20,546 77,136 (1,391 ) 37,952
 
Interest and other income 91 47 38 19
Other expenses (3 ) (147 ) (1 ) (30 )
Interest (2):
Expense incurred, net (1,258 ) (2,362 ) (6 ) (1,279 )
Amortization of deferred financing costs (228 ) (92 ) (46 )
Income and other tax (expense) benefit   (463 )   24     (405 )   128  
 
Discontinued operations 18,685 74,606 (1,765 ) 36,744
Net gain on sales of discontinued operations   1,588,874     204,053     389,952     71,097  
 
Discontinued operations, net $ 1,607,559   $ 278,659   $ 388,187   $ 107,841  
 
(1) Includes expenses paid in the current period for properties sold or held for sale in prior periods related to the Company's period of ownership.
 
(2) Includes only interest expense specific to secured mortgage notes payable for properties sold and/or held for sale.
 
Equity Residential
Normalized FFO Guidance Reconciliations and Non-Comparable Items
(Amounts in thousands except per share data)
(All per share data is diluted)
             
Normalized FFO Guidance Reconciliations
 
Normalized
FFO Reconciliations
Guidance Q2 2013
to Actual Q2 2013
Amounts Per Share
Guidance Q2 2013 Normalized FFO - Diluted (2) (3) $ 261,265 $ 0.695
Property NOI (primarily Archstone properties) 4,621 0.012
Other   1,382     0.004  
 
Actual Q2 2013 Normalized FFO - Diluted (2) (3) $ 267,268   $ 0.711  
 
                           
 
 
Non-Comparable Items – Adjustments from FFO to Normalized FFO (2) (3)
 
Six Months Ended June 30, Quarter Ended June 30,
2013 2012 Variance 2013 2012 Variance
 
Impairment $   $   $   $   $   $  
Asset impairment and valuation allowances                        
 
Archstone merger costs (merger expenses) 19,559 1,834 17,725 467 685 (218 )
Archstone merger costs (loss from investments in unconsolidated entities due to merger expenses) 53,010 53,010 6,999 6,999
Property acquisition costs (other expenses) 182 5,495 (5,313 ) 150 5,052 (4,902 )
Write-off of pursuit costs (other expenses)   3,365     3,565     (200 )   832     2,531     (1,699 )
Property acquisition costs and write-off of pursuit costs   76,116     10,894     65,222     8,448     8,268     180  
 
Prepayment premiums/penalties (interest expense) 71,443 272 71,171 272 (272 )
Write-off of unamortized deferred financing costs (interest expense) (A) 4,126 1,147 2,979 3 1,146 (1,143 )
Write-off of unamortized (premiums)/discounts/OCI (interest expense)   3,251     (42 )   3,293     (826 )       (826 )
Debt extinguishment (gains) losses, including prepayment penalties, preferred share
redemptions and non-cash convertible debt discounts   78,820     1,377     77,443     (823 )   1,418     (2,241 )
 
Net (gain) loss on sales of land parcels (14,616 ) (14,616 ) (14,616 ) (14,616 )
Net incremental (gain) on sales of condominium units (7 ) (49 ) 42 (7 ) (7 )
Income and other tax expense (benefit) - Condo sales (92 ) 92 (137 ) 137
(Gain) on sale of Equity Corporate Housing (ECH)   (601 )   (350 )   (251 )   (351 )   (350 )   (1 )
(Gains) losses on sales of non-operating assets, net of income and other tax expense (benefit)   (15,224 )   (491 )   (14,733 )   (14,974 )   (487 )   (14,487 )
 
 
Insurance/litigation settlement expense (other expenses) 4,714 (4,714 ) 528 (528 )
Prospect Towers garage insurance proceeds (real estate taxes and insurance) (3,467 ) 3,467
Other (other expenses)       976     (976 )       721     (721 )
Other miscellaneous non-comparable items       2,223     (2,223 )       1,249     (1,249 )
           
Non-comparable items – Adjustments from FFO to Normalized FFO (2) (3) $ 139,712   $ 14,003   $ 125,709   $ (7,349 ) $ 10,448   $ (17,797 )
 
(A) For the six months ended June 30, 2013, includes $2.5 million of bridge loan costs related to the Archstone transaction.
 
Note: See page 29 for the definitions, the footnotes referenced above and the reconciliations of EPS to FFO and Normalized FFO.
     
Equity Residential
Normalized FFO Guidance and Assumptions
   
The guidance/projections provided below are based on current expectations and are forward-looking. All guidance is given on a Normalized FFO basis. Therefore, certain items excluded from Normalized FFO, such as debt extinguishment costs/prepayment penalties, property acquisition costs and the write-off of pursuit costs, are not included in the estimates provided on this page. See page 28 for estimates of property acquisition costs, prepayment premiums/penalties and other amounts not included in 2013 Normalized FFO guidance. See page 29 for the definitions, the footnotes referenced below and the reconciliations of EPS to FFO and Normalized FFO.
 
 
 

2013 Normalized FFO Guidance (per share diluted)

 

Q3 2013

2013

 
Expected Normalized FFO (2) (3) $0.71 to $0.75 $2.80 to $2.85
 

2013 Same Store Assumptions

 
Physical occupancy 95.3 %
Revenue change 4.4% to 4.6%
Expense change 3.0% to 3.5%
NOI change 5.0% to 5.25%
 
(Note: The same store guidance above is computed based on the portfolio of approximately 80,000 apartment units that the Company expects to have in its annual same store set after the completion of its planned 2013 dispositions. 30 basis point change in NOI percentage = $0.01 per share change in EPS/FFO/Normalized FFO)
 

2013 Transaction Assumptions

 
Consolidated rental acquisitions (excluding Archstone) $100.0 million
Consolidated rental dispositions - EQR assets $4.1 billion
Consolidated rental dispositions - Archstone assets (pre-closing) $500.0 million
Capitalization rate spread 110 basis points
 

2013 Debt Assumptions, Includes Impact of Archstone Debt Premium (see Note below)

 
Weighted average debt outstanding $11.4 billion to $11.6 billion
Weighted average interest rate (reduced for capitalized interest) 4.23 %
Interest expense $482.2 million to $490.7 million
 

2013 Other Guidance Assumptions

 
General and administrative expense $57.0 million to $58.0 million
Interest and other income $0.8 million to $1.0 million
Income and other tax expense $2.9 million to $3.1 million
 
Debt offerings No additional amounts budgeted
Equity ATM share offerings No amounts budgeted
Preferred share offerings No amounts budgeted
Weighted average Common Shares and Units - Diluted 370.6 million
 
Note: All debt assumptions include the impact of a mark-to-market non-cash adjustment relating to Archstone's debt that the Company assumed. Excluding the impact of the Archstone net debt premium, the Company's debt assumptions would be as follows:
 
Weighted average debt outstanding without Archstone net premium $11.3 billion to $11.5 billion
Weighted average interest rate (reduced for capitalized interest) without Archstone net premium 4.63 %
Interest expense without Archstone net premium $523.2 million to $532.5 million
                 
Equity Residential
2013 Non-Comparable Items Guidance
(Amounts in thousands)
       
The Non-Comparable Items provided below are based on current expectations and are forward looking.
 
Midpoint of Forecasted 2013 Non-Comparable Items – Adjustments from FFO to Normalized FFO (2) (3)
 
Expected Q3 2013 Expected 2013
 
Amounts Per Share Amounts Per Share
       
Asset impairment and valuation allowances $   $ $   $  
 
Archstone merger costs (merger expenses) 19,559 0.05
Archstone merger costs (loss from investments in unconsolidated entities due to merger expenses) 3,423 0.01 59,060 0.16
Property acquisition costs (other expenses) 30 242
Write-off of pursuit costs (other expenses)   1,700       6,765     0.02  
Property acquisition costs and write-off of pursuit costs   5,153     0.01   85,626     0.23  
 
Prepayment premiums/penalties 71,443 0.19
Write-off of unamortized deferred financing costs 4,138 0.01
Write-off of unamortized (premiums)/discounts/OCI         3,075     0.01  
Debt extinguishment (gains) losses, including prepayment penalties, preferred share redemptions
and non-cash convertible debt discounts         78,656     0.21  
 
Net (gain) loss on sales of land parcels 2,356 0.01 (12,260 ) (0.03 )
Net incremental (gain) on sales of condominium units (7 )
(Gain) on sale of Equity Corporate Housing (ECH)   (108 )     (1,470 )    
(Gains) losses on sales of non-operating assets, net of income and other tax expense (benefit)   2,248     0.01   (13,737 )   (0.03 )
       
Other miscellaneous non-comparable items              
       
Non-comparable items – Adjustments from FFO to Normalized FFO (2) (3) $ 7,401   $ 0.02 $ 150,545   $ 0.41  
 
Note: See page 29 for the definitions, the footnotes referenced above and the reconciliations of EPS to FFO and Normalized FFO.
 
Equity Residential
Additional Reconciliations, Definitions and Footnotes
(Amounts in thousands except per share data)
(All per share data is diluted)
       
The guidance/projections provided below are based on current expectations and are forward-looking.
 
Reconciliations of EPS to FFO and Normalized FFO for Pages 7, 26 and 28

 

 

 

Expected Q2 2013

Expected Expected
Q3 2013 2013
Amounts Per Share Per Share Per Share
 
Expected Earnings - Diluted (5) $573,487 $1.525 $0.28 to $0.32 $4.06 to $4.11
Add: Expected depreciation expense 312,676 0.832 0.84 3.18
Less: Expected net gain on sales (5) (618,917) (1.646) (0.43) (4.85)
 
Expected FFO - Diluted (1) (3) 267,246 0.711 0.69 to 0.73 2.39 to 2.44
 
Asset impairment and valuation allowances
Property acquisition costs and write-off of pursuit costs 7,267 0.019 0.01 0.23
Debt extinguishment (gains) losses, including prepayment penalties,
preferred share redemptions and non-cash convertible debt discounts (823) (0.002) 0.21
(Gains) losses on sales of non-operating assets, net of income and other tax
expense (benefit) (12,425) (0.033) 0.01 (0.03)
Other miscellaneous non-comparable items
 
Expected Normalized FFO - Diluted (2) (3) $261,265 $0.695 $0.71 to $0.75 $2.80 to $2.85
 
Definitions and Footnotes for Pages 7, 26 and 28
   
(1) The National Association of Real Estate Investment Trusts ("NAREIT") defines funds from operations ("FFO") (April 2002 White Paper) as net income (computed in accordance with accounting principles generally accepted in the United States ("GAAP")), excluding gains (or losses) from sales and impairment write-downs of depreciable operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis. The April 2002 White Paper states that gain or loss on sales of property is excluded from FFO for previously depreciated operating properties only. Once the Company commences the conversion of apartment units to condominiums, it simultaneously discontinues depreciation of such property.
 
(2) Normalized funds from operations ("Normalized FFO") begins with FFO and excludes:
• the impact of any expenses relating to non-operating asset impairment and valuation allowances;
• property acquisition and other transaction costs related to mergers and acquisitions and pursuit cost write-offs;
• gains and losses from early debt extinguishment, including prepayment penalties, preferred share redemptions and the cost related to the implied option value of non-cash convertible debt discounts;
• gains and losses on the sales of non-operating assets, including gains and losses from land parcel and condominium sales, net of the effect of income tax benefits or expenses; and
• other miscellaneous non-comparable items.
 
(3) The Company believes that FFO and FFO available to Common Shares and Units are helpful to investors as supplemental measures of the operating performance of a real estate company, because they are recognized measures of performance by the real estate industry and by excluding gains or losses related to dispositions of depreciable property and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO and FFO available to Common Shares and Units can help compare the operating performance of a company's real estate between periods or as compared to different companies. The company also believes that Normalized FFO and Normalized FFO available to Common Shares and Units are helpful to investors as supplemental measures of the operating performance of a real estate company because they allow investors to compare the company's operating performance to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company's actual operating results. FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units do not represent net income, net income available to Common Shares or net cash flows from operating activities in accordance with GAAP. Therefore, FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units should not be exclusively considered as alternatives to net income, net income available to Common Shares or net cash flows from operating activities as determined by GAAP or as a measure of liquidity. The Company's calculation of FFO, FFO available to Common Shares and Units, Normalized FFO and Normalized FFO available to Common Shares and Units may differ from other real estate companies due to, among other items, variations in cost capitalization policies for capital expenditures and, accordingly, may not be comparable to such other real estate companies.
 
(4) FFO available to Common Shares and Units and Normalized FFO available to Common Shares and Units are calculated on a basis consistent with net income available to Common Shares and reflects adjustments to net income for preferred distributions and premiums on redemption of preferred shares in accordance with accounting principles generally accepted in the United States. The equity positions of various individuals and entities that contributed their properties to the Operating Partnership in exchange for OP Units are collectively referred to as the "Noncontrolling Interests – Operating Partnership". Subject to certain restrictions, the Noncontrolling Interests – Operating Partnership may exchange their OP Units for Common Shares on a one-for-one basis.
 
(5) Earnings represents net income per share calculated in accordance with accounting principles generally accepted in the United States. Expected earnings is calculated on a basis consistent with actual earnings. Due to the uncertain timing and extent of property dispositions and the resulting gains/losses on sales, actual earnings could differ materially from expected earnings.
 
Same Store NOI Reconciliation for Page 11
   
The following tables present reconciliations of operating income per the consolidated statements of operations to NOI for the June YTD 2013 and the Second Quarter 2013 Same Store Properties:
     
Six Months Ended June 30, Quarter Ended June 30,
2013   2012 2013   2012
 
Operating income $ 182,281 $ 237,412 $ 71,033 $ 128,560
Adjustments:
Non-same store operating results (152,003 ) 5,110 (111,282 ) 378
Fee and asset management revenue (4,833 ) (4,276 ) (2,673 ) (2,212 )
Fee and asset management expense 3,223 2,487 1,577 1,180
Depreciation 528,328 289,273 327,985 145,438
General and administrative   32,582     27,079     16,086     13,391  
 
Same store NOI $ 589,578   $ 557,085   $ 302,726   $ 286,735  
 

Equity Residential
Marty McKenna, 312-928-1901